Texas Instruments' profit mirrors industry's rosier outlook

STEVE QUINN

Published
7:00 pm CDT, Monday, July 25, 2005

Associated Press Writer

Texas Instruments Inc.'s quarterly profit rose 42 percent as the semiconductor maker benefited from lower inventory levels among customers and robust demand for chips in a variety of new electronic gadgets.

The increase comes after last month's announcement by the San Jose, Calif.-based Semiconductor Industry Association that it would recast its November 2004 forecast for this year from flat to 6 percent growth.

The association believed high fuel prices would drag down spending in products that require semiconductors. Instead, semiconductor sales for the first five months are up year-to-year and prompted the revised outlook, said association spokesman John Greenagel.

"Semiconductors are more and more pervasive," Greenagel said. "When you buy a new cell phone full of new features like video, it's driving up chip sales."

Quarterly income at Texas Instruments rose to $628 million, or 38 cents per share, from $441 million, or 25 cents per share, a year ago. Excluding a tax benefit, the company said it would have earned 32 cents per share in the latest quarter.

The results beat both the Richardson-based company's June forecast for earnings of 27 cents to 30 cents per share, as well as analysts' expectations for profit of 29 cents per share, according to a Thomson Financial survey.

TI was helped, in part, by the depletion of pent-up inventory that began accumulating at semiconductor distributors last fall, said Ron Slaymaker, TI's vice president of investor relations.

"Part of it is the overall industry is emerging from this inventory-driven downturn," Slaymaker said. "We are now shipping to the rate of which our customers are shipping and the rate that retail channels are selling the end product."

Slaymaker told analysts that the second quarter growth was "very broad-based" for sales in chips for wireless phones, the PC market _ including notebook computers and printers _ and digital televisions and projectors.

"This gives us strong confidence our growth will continue to be strong into the third quarter," Slaymaker said.

Cody Acree, analyst with Legg Mason Wood Walker, said the inventory levels were a "drag on the company," but that "everything is working" now.

"They are in a strong position in most markets," he said. "It's some of the strongest numbers I've seen out of TI in a long time."

Revenue was flat with year-ago levels at $3.24 billion, though this hit the high end of TI's sales forecast and beat analysts' predictions for revenue of $3.19 billion.

Sales were up 9 percent from the first quarter, driven by increased demand for the company's analog and digital signal processing, or DSP, semiconductor products. A seasonal boost in demand for educational calculators also contributed to the higher results. Texas Instruments said semiconductor orders rose 15 percent from the first quarter.

TI expects third-quarter earnings of 31 cents to 35 cents per share, or 34 cents to 38 cents per share excluding the cost of expensing employee stock options. Revenue will range from $3.29 billion to $3.56 billion, the company said.

Analysts currently predict third-quarter profit of 32 cents per share on sales of $3.36 billion.

Texas Instruments' share price has climbed from a 52-week low of $18.06 last summer to a high of $31.51 just last week. The stock settled at $30.60 Monday on the New York Stock Exchange.